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Global stocks recover after Evergrande fears ease
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THE US and European equities rebounded yesterday after fears over the possible collapse of Chinese property giant Evergrande sparked a rout across global markets on Monday.
The Dow Jones Industrial Average, the tech-heavy Nasdaq and the S&P 500 were all around 0.4 percent higher in early trading as Wall Street opened.
In Europe, London stocks advanced 1.1 percent, while Frankfurt and Paris each won 1.4 percent in afternoon trading.
Major European markets had fallen between around 1 and 2 percent on Monday, similar to drops seen on Wall Street. The picture was mixed in Asia yesterday, with Hong Kong closing up 0.5 percent, while Tokyo slumped 2.2 percent. Shanghai was closed for the Mid-Autumn Festival holiday.
“The early contention is that yesterday’s reported angst that a debt default by China’s Evergrande could trigger systemic risk has been tempered,” said Briefing.com analyst Patrick O’Hare.
“Helping in this regard are many pundits suggesting Evergrande is not a ‘Lehman moment’ and reports that Evergrande’s chairman said the property developer plans to fulfill its responsibilities,” O’Hare said, referring to the collapse of the Wall Street giant firm during the 2008 financial crisis.
The developer has been struggling to appease angry homebuyers and investors as it sways on the brink of collapse with debts exceeding US$300 billion.
Xu Jiayin, who founded the company in 1996, told staff in a letter to mark Mid-Autumn Festival that he “firmly believes Evergrande will be able to step out of the darkest moment soon.”
He went on to say Evergrande would increase the full resumption of work and production, ensure the delivery of buildings, and “hand over a responsible answer to homebuyers, investors, partners and financial institutions.”
Attention today will be on the Fed’s policy meeting, where the central bank is expected to lay the groundwork to ease its stimulus, although the consensus is for an actual announcement to be delayed until the November or December meetings. Taper fears have already roiled markets so far in September, and along with seasonally weak trends, have set the S&P 500 on course to snap a seven-month winning streak.
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